HHS Secretary Azar Floats Plan to Lower Prescription Drug Costs

Health and Human Services sign outside office building

As lawmakers in Congress are exploring potential price-lowering options for prescription drugs, Department of Health and Human Services Secretary Alex Azar is floating a proposed rule to lower the prices and out-of-pocket expenses by encouraging manufacturers to pass discounts to patients instead of insurers.

The HHS plan is aimed at providing new transparency to the prescription drug market and removing the veil of hidden rebates and other pricing methods currently conducted between companies and pharmacy benefits managers. The rebates and other pricing initiates conducted between the companies, PBMs and insurers are not typically passed along to patients, an HHS fact sheet noted.

Azar, a former executive with Eli Lilly, said the “hidden system of kickbacks to middlemen” has forced people to pay more for their medications. Under the proposed rule, prescription drug rebates that today amount to, on average, 26 to 30 percent of a drug’s list price may be passed on directly to patients and reflected in what they pay at the pharmacy counter. Azar said this proposal will benefit all people who buy prescription drugs, but particularly senior citizens who use Medicare Part D. He said the proposal is projected to provide the greatest benefits to seniors with high drug costs.

The proposed pricing plan is something that President Donald Trump has been touting since he was first elected. He most famously claimed that pharmaceutical companies are “getting away with murder” when it comes to the prices the companies charge for medication. Last year, the White House laid out the American Patients First pricing blueprint that called for more transparency in prescription drug pricing, something that drugmakers have criticized. In October, the administration announced a plan to propose changes to Medicare drug pricing. Part of the proposal included requiring the disclosure of list prices in television ads, increasing negotiated discounts in Medicare, banning pharmacy gag clauses, adopting real-time prescription benefit tools, and boosting low-cost generic and biosimilar competition.

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Under the proposal, the new rules would exclude from safe harbor protection under the Anti-Kickback Statute rebates on prescription drugs paid by manufacturers to pharmacy benefit managers, Part D plans and Medicaid managed care organizations. The new plan would create a new safe harbor for prescription drug discounts offered directly to patients, as well as fixed fee service arrangements between drug manufacturers and PBMs, the government agency said.

In the announcement, Azar said since the proposal addresses the notion of drug rebates, this would relieve drugmakers of the pressure to provide larger and larger rebates to the PBMs, which are then reflected in annual price hikes, most typically on branded drugs. In January, multiple companies raised the price of drugs, an increase of 6 to 7 percent on certain drugs by Johnson & Johnson. The life sciences giant followed other companies such as Pfizer, Allergan, Sanofi, GlaxoSmithKline and others who had already announced plans to increase prices this year.

“This proposal has the potential to be the most significant change in how Americans’ drugs are priced at the pharmacy counter, ever, and finally ease the burden of the sticker shock that millions of Americans experience every month for the drugs they need,” Azar said in a statement.

U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb touted the proposal on Twitter. Gottlieb said the “highly significant new proposed rule” put forth by Azar “has the potential to transform how drugs are priced; in the process generating significant savings for patients and improving access to lifesaving medicines.”

As Congress bandies about several bills and holds pricing hearings, Azar said the new proposal could be passed into law immediately and begin to save patients money. He said the plan is a “major departure from a broken status quo that serves special interests.”

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